Does Agricultural Growth Matter in Poverty Alleviation?

This article uses a panel survey of households in the Indian state of Maharashtra to demonstrate that agricultural growth takes too long to trickle down to the rural poor. Unanticipated inflation, on the other hand, aggravates rural poverty, as does domination of the agricultural growth process by large landholders. This affects the poor through the oligopsonistic influence of the landholders in rural labour markets, dampening employment and wages (as compared with the outcome in a competitive market). In the context of structural adjustment, while the emphasis on allocative efficiency through withdrawal of input subsidies and remunerative prices for output is justified, acceleration in agricultural growth by itself is unlikely to make a dent in rural poverty. Measures designed to accelerate agricultural growth must therefore be supplemented by direct anti‐poverty interventions. Consumer price stabilization is particularly important, and would be assisted by an overhaul of the Public Distribution System. Major reforms would include improved flexibility in the scale of the PDS, better targeting through alternative distribution networks when private trade channels are weak or non‐existent, and simplification of registration procedures. The oligopsonistic role of large landholders could be curbed through market‐mediated land redistribution, scrapping of all tenancy regulations when tenancy markets function efficiently, and through large‐scale intervention in rural labour markets along the lines of the Employment Guarantee Scheme.